Planning the Descent 

Starting point

We were contacted by a federal government employee and Navy veteran who was about a year from retirement. He had done his research — months of comparing advisors, building his own scenario spreadsheets, talking to peers. Several colleagues had told him he didn’t need an advisor, that he could manage it himself. He wasn’t so sure. As he put it: “I don’t know what I’m missing, and I want to find out before it’s too late.”

He was single, divorced, with no children. Between his government pension and his Navy pension, he had about $6,000 a month in guaranteed income. When Social Security kicked in at 67, that would rise to nearly $10,000. He also had roughly $1.5 million in his Thrift Savings Plan. He wanted to retire at 61 — six years before Social Security — and live on about $13,000 a month pretax, or roughly $10,000 after taxes. He wanted a house in the mountains.

The crux of his situation was something we see often with government employees who have built their thinking around their pensions: he understood how to grow a portfolio, but not how to spend one. He had accumulated $1.5 million and knew it was enough, in theory. But he had no structure for turning it into reliable income — particularly across a six-year gap before Social Security, and across the decades after that.

There’s an analogy we sometimes use: most of the danger on Everest isn’t the climb up. It’s the descent.

Realization

Without a plan, the math pointed toward two problems. First, sequence-of-returns risk. If his $1.5 million stayed in a growth-oriented portfolio and the market dropped 50 percent early in retirement — as it did in 2008 — he’d be drawing income from $750,000 instead. At his withdrawal rate, recovering from that kind of loss would be unlikely.

Second, the RMD problem. If he barely touched his TSP — and he didn’t need much from it — that balance could grow to several times its current size by the time Required Minimum Distributions forced him to withdraw. Distributions of $300,000 or more a year were a realistic projection, income he didn’t want or need, carrying a tax bill he shouldn’t have to pay.

Approach

We restructured the portfolio around a simple principle: make the money pay him, so he never has to worry about what the market is doing on the day he needs a check.

We built a 70/30 framework. The 30 percent allocation went into a protected-growth-and-income portfolio — core bonds, diversified for lower volatility and reduced correlation to the equity markets — designed to generate roughly $3,400 a month in reliable income regardless of market conditions.

The 70 percent growth allocation stayed in a diversified equity portfolio that moves with the market, with a portion dedicated to dividend-generating holdings. This side of the portfolio wasn’t tasked with paying his bills — it was tasked with compounding. But it still generated roughly $500 a month in passive income along the way.

Combined with his two pensions — about $6,000 a month — his total income before Social Security came to roughly $10,000. His goal was about $13,000. The remaining gap required the overall portfolio to grow by under 2 percent a year — a low bar that left the bulk of his assets free to grow rather than be consumed. Once Social Security kicked in, the gap would shrink further still.

Looking ahead

We set this plan in motion — and then the timeline moved. Government workforce reductions meant his retirement started a year earlier than expected. But the plan absorbed it. The income structure was already generating roughly $6,000 a month from the portfolio alone, and the yield environment had pushed that even higher. He had talked about seeking part-time work after retiring; once he saw the income arriving reliably each month, he decided he didn’t need to.

Now we’re layering in Roth conversions to manage his long-term tax exposure. Because the portfolio generates income passively — from interest and dividends rather than selling principal — the conversions don’t disrupt the structure. Even if the process reduces the portfolio’s total value over time, the remaining assets are sufficient to sustain the income he needs. And once those assets are in Roth accounts and the income is arriving tax-free, the pressure on the portfolio eases further.

He planned for the worst-case scenario. So far, he’s gotten the best one.